On Tuesday, a letter was issued to the City of Oakley by The Building Industry Association of the Bay Area requesting for an audit and questioning the fees Oakley charges.
According to the letter,they say the City charges the build impact fees up front and reimburses the builder for expenses later based on submitted receipts–however, they say Oakley keeps the difference between what it costs the builder to construct the improvements and the fees the builder pays to the city.
BIA|Bay Area is now asking that the Oakley City Council commission an audit to determine the scope and dollar amount of these potential “gap” funds and where they were spent.
Here is a copy of the letter:
April 25, 2017
Dear Mayor Higgins and Councilmembers,
I would like to extend my sincere thanks to your planning and transportation staff for their time and willingness to listen to input from BIA|Bay Area and its members regarding Oakley’s draft parks and transportation impact fee studies. For example, your staff incorporated into the revised park study several of our key recommendations.
Regrettably, our analysis shows that the transportation and park studies still fail to demonstrate a reasonable nexus between the fees being charged to new homes and the
cost of the public facilities for which the money is collected. The fees also exceed the reasonable cost of providing the services for which the fees are being charged. Both findings are required under the Mitigation Fee Act. Additionally, the fees would violate the Quimby Act and Gov’t Code Section 66014.
Specifically, in the vast majority of communities, the builder pays the fees and the city builds the improvements or the builder constructs the improvements and receives credits for the work toward other city fees based on a mutually agreed upon engineer’s estimate. The process varies but in Oakley, the builder often pays the impact fees up front and builds the improvements. Months later, the city reimburses the builder for actual expenses based on submitted receipts. Based on our members’ experiences, the actual costs are often lower than the city’s impact fees. But the city keeps the difference between what it costs the builder to construct the improvements and the fees the builder pays to the city. For example, the city’s fees include 25 percent for design and engineering costs but our members typically spend 10-12 percent for these line items.
This differential also nets Oakley cash when the builder builds parks or roads that are not required to mitigate the impacts for a specific project but make sense to build from a timing perspective.
The dollar amounts are potentially significant. Using the proposed parks and transportation fees, for example, the financial difference between 25 percent and 12 percent for design and engineering for a 100-unit single-family subdivision is approximately $268,000. Then if the builder spent 10 percent less on the remaining fee amount for actual costs on the traffic and park facilities, the city would keep an extra $655,000. Add an extra $5 million in road improvements along with the required $1.25 million or 25 percent for engineering and design — where the builder is reimbursed $5 million for the construction and $650,000 or 12 percent for engineering and design – and the city would net $600,000. In this single example, the city would potentially bank a combined $1.6 million for which no purpose for the funds has been identified as required under the Mitigation Fee Act.
BIA|Bay Area asks that the Oakley City Council commission an audit to determine the
scope and dollar amount of these potential “gap” funds and where they were spent. The
city should also move immediately to adopt a more defensible reimbursement program
used by many of its neighboring communities and supportable by state law. To continue
its current practice violates the Mitigation Fee Act and perpetuates a serious discrepancy
between the city’s stated purpose of the fees and the fee levels. The Mitigation Fee Act
also requires the public agency collecting fees to identify the purposes for which the fees
are charged and if the findings are not made as required, the local agency shall refund
the money to the current owners of the properties for which the fees were paid.
Among BIA’s other concerns:
- In a previous letter, we requested but did not receive a list of the park land, parks facilities and transportation projects that will be funded in their entirety or in part through existing development agreements with the City of Oakley. The two nexus studies should identify and reconcile the sources and amounts of funding identified in development agreements or homeowners could be subject to paying for the same amenities twice.
- In a previous letter, we requested but did not receive the construction status and
balance of funding needed of each carryover project from the 2003
Transportation Impact Fee study. Transparency is critical as some projects may
be close to completion. The city has pledged to regularly update its transportation
impact fee nexus study, which will help resolve this issue on the future. In the
meantime, we would again ask for a baseline status list.
To summarize, Oakley’s development impact fee structure unreasonably inflates its fees
through its reimbursement program and in its failure to reconcile transportation, parks
and other improvements funded entirely or in part through development agreements in
the impact fee nexus studies.
In closing, California is in the midst of one of the most serious housing affordability crisis in modern history. Homeownership is at its lowest level since the 1940s, currently 49th in the nation. And for every $1,000 increase in the cost of a home, another 15,000 California households are priced out of the market. We must do everything we can to make it cheaper to build a home so our children and grandchildren can someday have the economic security of homeownership.
Sincerely yours,
Lisa Vorderbrueggen
CC:
Oakley City Manager Bryan Montgomery
Oakley Planning Manager Josh McMurray
